1. What is Money Factor?

Money Factor is a decimal number used in vehicle leasing to represent the interest rate. It is essentially the lease equivalent of an annual percentage rate (APR) for loans.

2. How Does the Calculator Work?

The calculator uses the Money Factor formula:

Where:

• \( APR \) — Annual Percentage Rate (%)

Explanation: The formula converts APR percentage to a decimal money factor by dividing by 2400, which accounts for the monthly nature of lease payments.

3. Importance of Money Factor Calculation

Details: Understanding money factor helps consumers compare lease offers, calculate monthly payments, and negotiate better lease terms. A lower money factor means lower financing costs.

4. Using the Calculator

Tips: Enter the APR percentage value. All values must be valid (APR ≥ 0).

5. Frequently Asked Questions (FAQ)

Q1: What is a good money factor rate?
A: Money factors typically range from 0.001 to 0.004. Lower is better, with rates below 0.002 considered good for most vehicle leases.

Q2: How does money factor affect monthly payments?
A: The money factor directly impacts the finance portion of your lease payment. A higher money factor results in higher monthly payments.

Q3: Can I negotiate the money factor?
A: Yes, money factors are often negotiable, especially if you have good credit. Dealers may mark up the buy rate from the lending institution.

Q4: How does credit score affect money factor?
A: Higher credit scores typically qualify for lower money factors. Tier 1 credit (720+) usually gets the best rates offered by lenders.

Q5: Is money factor the same as interest rate?
A: No, but they are related. You can convert money factor to approximate APR by multiplying by 2400. Money factor of 0.002 equals approximately 4.8% APR.